Meet the New Discretionary Denial Factor on the PTAB Block: Settled Expectations

USPTO Acting Director Coke Morgan Stewart recently issued a decision discretionarily denying five petitions for inter partes review (IPR) filed by iRhythm against patents owned by Welch Allyn based on a factor that had not been used before—the petitioner’s longstanding awareness of an issued patent. This was notable not only because it was the first use of “settled expectations” to support a discretionary denial but also because the Acting Director found that many of the standard discretionary-denial factors, commonly referred to as the Fintiv factors, all tilted in favor of granting institution. Shortly thereafter, Acting Director Stewart issued additional decisions shedding further light on this new factor.

The June 6 decision [1] and the subsequent decisions the following week emphasize and expand the Patent Trial and Appeal Board’s (PTAB’s) renewed focus on discretionary denials, potentially opening new pathways for denial and providing practitioners with important takeaways for consideration.

PATENT OWNER’S REQUESTS FOR DISCRETIONARY DENIAL IN iRHYTHM

After iRhythm (the Petitioner) filed IPRs challenging five related patents, Welch Allyn (the Patent Owner) asked for discretionary denial of institution in each case under the Interim Processes for PTAB Workload Management. These interim processes, which issued in March, established a bifurcated system for deciding whether to institute an IPR or post-grant review (PGR) “between (i) discretionary considerations and (ii) merits and other non-discretionary statutory considerations.” [2]

The interim processes provide that—in addition to the discretionary factors enumerated based on existing Board precedent [3]—consideration would also be given to the PTAB’s ability to comply with pendency goals for ex parte appeals, its statutory deadlines for AIA proceedings, and other workload needs.

A list of specific factors was also provided:

• Whether the PTAB or another forum has already adjudicated the validity or patentability of the challenged claims;
• Whether there have been changes in the law or new judicial precedent issued since issuances of the claims that may affect patentability;
• The strength of the unpatentability challenge;
• The extent of the petition’s reliance on expert testimony;
• Settled expectations of the parties, such as the length of time the claims have been in force;
• Compelling economic public health or national security interest; and
• Any other considerations bearing on the director’s discretion.

While the interim processes suggest that the factors are “consistent with the discretionary considerations enumerated in existing Board,” the ones bolded and italicized above appear to represent new factors. Practitioners have awaited guidance on these new factors and the decision in iRhythm does provide some for both the settled expectations and reliance on expert testimony factors, as discussed below.

FINTIV FACTORS FAVOR INSTITUTION IN iRHYTHM

In considering the Patent Owner’s request for discretionary denial, it was noted that several arguments weighed against discretionary denial, including several of the Fintiv[4] factors. The projected final written decision on August 12, 2026 was well in advance of the district court trial date scheduled for March 22, 2027. [5] It was also noted that there appeared to be little to no investment in the district court proceeding, and that there would likely be a stay in the district court case if the IPRs were instituted. [6] The standard Fintiv factors were thus against a discretionary denial.

PETITION NOT ‘OVER-RELIANT’ ON EXPERT TESTIMONY IN iRHYTHM

Turning to the new factors referenced above, the Patent Owner’s argument that the Petitioner was “over-reliant on expert testimony” was also rejected. [7] Instead, Acting Director Stewart determined that the Petitioner appeared “to rely on its expert to explain the background knowledge of a person of ordinary skill in the art, and the expert provides citations to evidence in support of his statements in the required manner.” [8]

Thus, the decision shed some small amount of light on what is proper, and not overly reliant, use of expert testimony: when the expert testimony is used to explain background knowledge in the art and includes proper supporting evidentiary citations. But there are still many unresolved questions as to when and how this new factor will be used to support a discretionary-denial determination.

‘SETTLED EXPECTATIONS’ DISPOSITIVE IN iRHYTHM

Despite these factors all weighing against discretionary denial, institution was denied based on a finding that the new “settled expectations” factor favored denial. [9] This was because one of the patents “ha[d] been in force since as early as 2012 and Petitioner was aware of it as early as 2013—having cited the then-pending application that issued as the challenged patent in an Information Disclosure Statement (IDS) Petitioner filed in its own patent application.” [10]As such, Acting Director Stewart found that the Petitioner’s awareness of the Patent Owner’s applications and failure to seek early review of the patents favored denial and outweighed the other factors.

The Patent Owner’s requests for discretionary denial specifically argued for the new “settled expectations” factor, noting that “Petitioner, in its infancy, was particularly focused on patent searches” and that the Petitioner’s founder was even quoted as describing his early approach to competitor patents, saying that he needed “to figure out if people had done this before so [they] conducted IP searches,” and that their focus “was on patents that had already been issued as well as pending patent applications.” [11]

This logic appears to have persuaded the acting director to rest her decision on the new “settled expectations” factor in discretionarily denying the IPR petitions.

ADDITIONAL ‘SETTLED EXPECTATIONS’ DECISIONS SHORTLY AFTER iRHYTHM

About a week after iRhythm, Acting Director Stewart issued more decisions under the new bifurcated discretionary-denial process, two of which addressed the “settled expectations” factor. In one case, a patent owner argued that settled expectations applied where a company hired two inventors of the patent in 2021 but waited until they got sued in 2024 to challenge the inventors’ patent. [12]

The patent owner in that case noted that after being sued for infringement the petitioner “changed their tune” in asserting that the patent that “the inventors previously touted and profited from” was invalid. While Acting Director Stewart’s decision in that case did not reach the “settled expectations” analysis, she denied institution based on “unfair dealing,” noting that “[i]t is not an appropriate use of Office resources where the inventors applied for and were issued a patent, but . . . now advocate for its unpatentability.” [13]

In another case, the patent owner argued that “settled expectations” applied where the claims of the patent had been “in force for almost 8 years.” [14] Acting Director Stewart found the petitioner’s argument persuasive that “the challenged patent expired almost four years ago due to non-payment of maintenance fees, and, accordingly, it expected nonenforcement of the challenged patent.” [15] She denied the patent owner’s request for discretionary denial in that case.

OPEN QUESTIONS AROUND ‘SETTLED EXPECTATIONS’ AND PRACTICE POINTERS

These cases provide some initial guidance on the new “settled expectations” factor in the discretionary-denial equation, but also leave many questions unanswered, including the length of time that is long enough to create “settled” expectations, the types of evidence sufficient to impute early knowledge of an issued patent on an IPR petitioner, whether the settled expectations factor always outweighs all other discretionary-denial factors, and the relationship between the settled expectations factor and other new discretionary-denial factors for which guidance has not yet been provided, among others.

Further, as noted in the Patent Owner’s discretionary denial arguments, the pending application and the issued patent of the “ultimate parent patent” of the patents at issue in all five of the IPRs were each cited in separate IDS submissions by the Petitioner during prosecution of their own patent application. [16]

But this decision leaves unanswered questions around issues such as whether citing a pending application alone in an IDS (as opposed to an issued patent) would be sufficient to create settled expectations and whether the same “settled expectations” would have extended to other related patents of the Patent Owner outside of the direct patent family cited in the IDS.

CONCLUSION AND TAKEAWAYS

This decision validates the notion that a broader set of factors will be implicated than were previously—and with evolving weighing of the factors relative to one another—based on the PTAB’s new policies and discretionary-denial factors announced by Acting Director Stewart. Would-be petitioners should now consider the potential impact of IDS practices on feasibility of IPR challenges given this new “settled expectations” factor and might also consider the intersection of Rule 56 obligations with this new settled expectations factor when evaluating references for inclusion on a potential IDS.

For patent owners seeking discretionary denial, it will be important to examine patent office records and other public statements to try to establish early knowledge of a patent family by a petitioner. Potential developments or challenges around Acting Director Stewart’s authority to develop new factors for discretionary denial—while remaining compliant with the Administrative Procedure Act (APA)—is something to keep an eye on as well.

For example, to the extent that the new “settled expectations” factor effectively sets a time limit on IPR challenges against certain patents, it might be argued that this is inconsistent with the statute, which includes a nine-month time limit on filing PGRs but does not set out any such time limit for IPRs (and similar potential arguments might be raised around the USPTO’s authority to impose such a time limit while remaining compliant with the APA).

Finally, it is worth noting that John Squires’ nomination as the next Director of the USPTO was recently voted out of the Senate Judiciary Committee on June 12 by a vote of 20-2 and will now proceed to the Senate floor, where he is likely to be confirmed. If he is confirmed, it will be interesting for practitioners to follow whether he continues the renewed focus on discretionary denials and, if so, whether he adopts and continues expanding discretionary denials using the additional factors enumerated in the interim processes announced by Acting Director Stewart.